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Richmond, Virginia-based CarMax, Inc. (KMX) operates as a retailer of used vehicles and related products. Valued at a market cap of $12 billion, the company provides a range of related services, including vehicle financing, extended warranties, accessories, and repair services.

Companies valued at $10 billion or more are typically classified as “large-cap stocks,” and CarMax fits the label perfectly, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the auto & truck dealerships industry. The company is known for its no-haggle pricing, extensive vehicle inspections, and customer-friendly return policies. It provides a seamless omnichannel experience, allowing customers to shop, finance, and sell cars both online and in-store. CarMax is also renowned for its strong vehicle sourcing and inventory management, ensuring a wide selection of quality cars through trade-ins, auctions, and direct purchases.

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Despite its notable strength, this used vehicle retailer has dipped 14.6% from its 52-week high of $91.25, reached on Dec. 19, 2024. Moreover, it has declined 7% over the past three months, lagging behind the broader Dow Jones Industrial Average’s ($DOWI) 2.3% downtick over the same time frame.

Moreover, in the longer term, KMX has fallen 10.6% over the past 52 weeks, underperforming DOWI’s 5.5% uptick. However, on a six-month basis, shares of KMX are slightly up, outpacing DOWI’s marginal decline over the same time period.

To confirm its bearish trend, KMX has been trading below its 200-day moving average since early March, and has remained below its 50-day moving average since late February.

On Mar. 27, shares of CarMax, along with other auto parts stores and used car retailers, saw a rise due to speculation that the newly imposed 25% tariff on U.S. auto imports would lead consumers to keep and maintain their used cars rather than purchase new models. As a result, KMX's shares increased by 2.5% that day.

However, KMX has been underperforming over the past year due to the stronger-than-expected but struggling used car market and the slower-than-expected pace of interest rate reduction. Despite this, it delivered a solid Q3 performance on Dec. 19, 2024, which led to a 3.5% increase in its stock price. Its revenue grew 1.2% year-over-year to $6.2 billion with combined retail and wholesale used vehicle volume up by 5.8%. Moreover, its net earnings advanced by a notable 55.8% annually to $0.81 per share, driven by improved margins.

KMX has lagged behind its rival, AutoNation, Inc.’s (AN) 2.2% decline over the past 52 weeks but has outpaced AN’s 11.3% loss on a six-month basis.

Despite CarMax’s recent underperformance relative to the Dow, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 17 analysts covering it, and the mean price target of $87.57 suggests a 12.4% premium to its current levels.

On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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